Financial Statements Bulletin of KONE Corporation for January-December 2013

KONE Corporation, stock exchange release, January 28, 2014 at 12:30 p.m. EET

October-December 2013: Strong development on a broad basis

• In October-December 2013, orders received totaled EUR 1,473 (10-12/2012: 1,321) million. Orders received grew by 11.5% at historical exchange rates and by 16.0% at comparable exchange rates. 

• Net sales grew by 9.4% to EUR 2,033 (1,858) million. At comparable exchange rates the growth was 13.1%. 

• Operating income was EUR 292.8 (257.4) million or 14.4% (13.9%) of net sales. 

• Cash flow from operations was EUR 240.8 (266.6) million. 

January-December 2013: Strong overall progress

• In January-December 2013, orders received totaled EUR 6,151 (1-12/2012: 5,496) million. Orders received grew by 11.9% at historical exchange rates and by 14.1% at comparable exchange rates. The order book stood at EUR 5,587 (Dec 31, 2012: 5,050) million at the end of December 2013. 

• Net sales grew by 10.4% to EUR 6,933 (6,277) million. At comparable exchange rates the growth was 12.6%. 

• Operating income was EUR 953.4 (828.7) million or 13.8% (13.2%) of net sales (1-12/2012 figures exclude a one-time cost of EUR 37.3 million related to the support function development and cost adjustment programs). 

• Basic earnings per share was EUR 1.37 (1.17). The comparable basic earnings per share excluding one-time items was EUR 1.37 (1.23). 

• Cash flow from operations was EUR 1,213 (1,071) million. 

• In 2014, KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2013. The operating income (EBIT) is expected to be in the range of EUR 980-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014. 

• The Board proposes a dividend of EUR 1.00 per class B share for the year 2013. 

Key Figures

Comparative figures for 2012 have been restated according to the revised IAS 19 'Employee Benefits'.

¹⁾ Excluding a MEUR 37.3 one-time cost related to the support function development and cost adjustment programs.

Matti Alahuhta, President & CEO, in conjunction with the review:

"Our business development was very strong in the last quarter of the year. Orders received grew by 11.5% at historical and by 16.0% at comparable exchange rates to EUR 1,473 million. Orders received growth was driven by a positive development in all geographical regions. Sales grew by 9.4% at historical and by 13.1% at comparable exchange rates to EUR 2,033 million. Sales grew in all regions. Operating income grew by 13.7% to EUR 293 million, or 14.4% of sales, driven primarily by continued strong sales growth in Asia-Pacific and a good business development in North America. Cash flow was at a good level of EUR 241 million.

Our performance was strong also for the full year 2013. Orders received grew by 11.9% at historical and by 14.1% at comparable exchange rates to EUR 6,151 million, and sales by 10.4% and 12.6%, respectively, to EUR 6,933 million. Operating income grew by 15.1% and reached EUR 953 million,13.8% of sales. Cash flow was at a record-high level of EUR 1,213 million.

I am very pleased with our progress in 2013. We again achieved faster than market growth in key growth markets, and were also able to sustain a solid performance in the most difficult regions. With focused efforts, we have been able to improve our operational performance and quality across the company. I want to express my thanks to all KONE employees for their effort!

In 2013, new equipment market growth was driven by Asia-Pacific, China in particular. The growth of the Chinese market picked up again in the last quarter of the year, resulting in a full-year market growth rate of slightly above 15%. KONE's growth in China was clearly higher, leading again to increased market share. In North America, the recovery of the market continued. In Europe, the uncertainty of the market environment decreased towards the end of the year, but development in both the new equipment and modernization markets was still weakening. The
persisting low new equipment volumes continued to impact the market also through intensified price competition in maintenance and modernization.

In 2014, in new equipment, we expect to see clear growth in Asia-Pacific, with an expected market growth of approximately 10% in China. The market in the EMEA region is expected to grow slightly, although demand in Europe is likely to still decline slightly. The market in North America is expected to continue to grow. In modernization, we expect the market to grow slightly, and most maintenance markets are expected to continue to develop rather well.

Our three-year development programs have proved to be a very effective way to develop competitive assets. We completed our previous set of three-year development programs at the end of the year. During these years, the satisfaction of our customers and employees improved, the competitiveness of our solutions advanced further, the development of our service business made significant progress, and the quality of our delivery chain clearly improved. We are now starting work with already the fourth set of development programs. The start of new programs has become a symbol of a beginning of a new phase to us.

Uncertainty in the weak markets diminished towards the end of the year. This, coupled with the outlook on growth markets remaining positive, make us look to the new year with confidence."

Operating environment in October-December (Q4 2013)

In the last quarter of 2013, the new equipment market growth accelerated in Asia-Pacific, while market development in other regions was largely unchanged. New equipment demand in the Europe, Middle East and Africa (EMEA) region was overall rather stable. In North America, market growth continued. The major projects segment remained active globally. The modernization market grew slightly. Maintenance markets grew in most countries, although at low rates in such countries, where new equipment activity has been weak for the past years.

Operating environment in January-December 2013

In 2013, markets in Asia-Pacific, North America and the Middle East developed positively. In Europe, uncertainty on the market decreased towards the end of the year. In the Europe, Middle East and Africa (EMEA) region, the new equipment market declined slightly. In North America, the recovery of the market progressed throughout the year. The market in Asia-Pacific grew at a somewhat higher rate than in the previous year driven by rapid growth in China. The major projects segment grew somewhat, driven by strong activity in Asia-Pacific, the Middle East and North America. The modernization market was relatively stable, with positive development in North America and Asia-Pacific, but a decline in the EMEA region. Maintenance market growth was the fastest in Asia-Pacific, driven by growth in new equipment installations. In the more mature maintenance markets, the growth rate was lower, with many countries seeing a very competitive market environment.

Market outlook 2014

In new equipment, the market in Asia-Pacific is expected to grow clearly in 2014. The market in China is expected to grow by approximately 10%. The market in the EMEA region is expected to grow slightly, with a relatively stable demand in Central and North Europe, a further slight decline in South Europe, and a growing demand in the Middle East. The market in North America is expected to continue to grow.

The modernization market is expected to grow slightly.

The maintenance markets are expected to develop rather well in most countries.

Business outlook 2014

KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2013.

The operating income (EBIT) is expected to be in the range of EUR 980-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014.

The Board's proposal for the distribution of profit

The parent company's non-restricted equity on December 31, 2013 is EUR 1,357,635,587.39 of which the net profit for the financial year is EUR 429,462,500.68.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.9975 be paid on the outstanding 76,208,712 class A shares and EUR 1.00 on the outstanding 436,474,010 class B shares, resulting in a total amount of proposed dividends of EUR 512,492,200.22. The Board of Directors further proposes that the remaining non-restricted equity, EUR 845,143,387.17 be retained and carried forward.

The Board proposes that the dividends be payable from March 6, 2014. All the shares existing on the dividend record date are entitled to dividend for the year 2013 except for the own shares held by the parent company.

Press and analyst meetings

A meeting for the press, conducted in Finnish, will be held on Tuesday, January 28, 2014 at 2:15 p.m. EET.

A meeting for analysts, conducted in English, will begin at 3:45 p.m. EET. The meeting will be available as a live webcast on www.kone.com. The meeting participants can also join a telephone conference that will be arranged in conjunction with the meeting. The telephone conference details are set out below.

Both meetings will take place in the KONE Building, located at Keilasatama 3, Espoo, Finland.

Telephone conference numbers:

Finnish callers: +358 9 2313 9201
US callers: +1 334 323 6201
UK callers: +44 20 7162 0077
Participant code: KONE

An on-demand version of the webcast will be available on www.kone.com later during the same day.

For further information, please contact:

Karla Lindahl, Director, Investor Relations, tel. +358 (0) 204 75 4441

Sender:

KONE Corporation

Henrik Ehrnrooth                      
CFO

Anne Korkiakoski
Executive Vice President
Marketing & Communications

About KONE

KONE is one of the global leaders in the elevator and escalator industry.  KONE's objective is to offer the best People Flow® experience by developing and delivering solutions that enable people to move smoothly, safely, comfortably and without waiting in buildings in an increasingly urbanizing environment. KONE provides industry-leading elevators, escalators, automatic building doors and integrated solutions to enhance the People Flow in and between buildings.  KONE's services cover the entire lifetime of a building, from the design phase to maintenance, repairs and modernization solutions. In 2013, KONE had annual net sales of EUR 6.9 billion, and at the end of the year over 43,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com